Peter Schiff, economist and best-selling author, has warned that America is on the brink of a new Great Depression, brought on by high inflation levels and the loss of purchasing power of Americans.
The Coming Crisis
Schiff believes that the high rates of inflation are brought on by the government increasing public spending. This increase in public spending ultimately affects the U.S. public debt, which will lead to an economic crisis far worse than the Great Depression of the 30s. He said:
“We’re going to have a crisis because we do raise the debt ceiling. Because we’ve continued to raise that debt ceiling instead of dealing with the real problem, which is not the ceiling, but the debt. The ceiling would be the solution to the problem if they only stopped raising it.”
Schiff predicts that even people who don’t lose their jobs will suffer because they’re going to lose the value of their paychecks. He explained:
“It’s probably going to be worse. It is a depression, but unlike the depression of the 1930s, where the people at least got the benefit of falling prices that provided some relief. This time, even the people who don’t lose their jobs are going to suffer because they’re going to lose the value of their paychecks.”
The Misleading CPI Numbers
Schiff also criticized the Consumer Price Index (CPI) data used to determine inflation. He stated that it is designed to mislead the public by providing artificially low results where a doubling of the official numbers would better reflect the actual situation. He believes that the real inflation number should be closer to 10%.
High Interest Rates and Inflation
Schiff argues that high-interest rates will not be able to control inflation and that the U.S. will have to deal with both issues. According to him, interest rates are prices, the price you pay when you borrow money. It increases just like the price of everything else. Schiff finally remarked that as interest goes up, businesses will pass on the cost of borrowing to their clients through higher prices.
